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Earnings Yield |
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Earnings yield The ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price-earnings ratio. It is the total twelve months earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.
Earnings Yield The price of a security per share at a given time divided into its annual earnings per share. It is the inverse of the more common price-earnings ratio. Often, the earnings used are trailing 12-month earnings, but some analysts use other forms. The earnings yield is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. It is also a measure of expected, but not realized, growth. It may be used in place of the price-earnings ratio if, say, there are no earnings (as one cannot divide by zero). It is also called the earnings-price ratio. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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In turn, Ryanair would benefit from Aer Lingus's superior earnings yield, which is better than the returns Ryanair can get on its cash deposits. The figure below compares the S&P 500 earnings yield with the ten-year Treasury bond yield, It shows that, beginning in September 2002--and for the first time since Ronald Reagan's first election--investors required from equities a higher earnings yield than the benchmark bond yield. The proxy we use to estimate its future real return is the current earnings yield (e/p) for the S&P 500, based on the notion that earnings derive from real assets and so should provide a real return above inflation. |
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